Correlation Between Sparx Technology and Enbridge Pref

Can any of the company-specific risk be diversified away by investing in both Sparx Technology and Enbridge Pref at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sparx Technology and Enbridge Pref into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparx Technology and Enbridge Pref 11, you can compare the effects of market volatilities on Sparx Technology and Enbridge Pref and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sparx Technology with a short position of Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparx Technology and Enbridge Pref.

Diversification Opportunities for Sparx Technology and Enbridge Pref

0.8

Correlation Coefficient

Sparx Technology  Enbridge Pref

Very poor diversification

The 3 months correlation between Sparx and Enbridge is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology and Enbridge Pref 11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 11 and Sparx Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sparx Technology are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 11 has no effect on the direction of Sparx Technology i.e., Sparx Technology and Enbridge Pref go up and down completely randomly.

Pair Corralation between Sparx Technology and Enbridge Pref

Assuming the 90 days trading horizon Sparx Technology is expected to generate 3.85 times more return on investment than Enbridge Pref. However, Sparx Technology is 3.85 times more volatile than Enbridge Pref 11. It trades about 0.18 of its potential returns per unit of risk. Enbridge Pref 11 is currently generating about 0.31 per unit of risk. If you would invest  2,592  in Sparx Technology on September 28, 2024 and sell it today you would earn a total of  227.00  from holding Sparx Technology or generate 8.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Sparx Technology  vs.  Enbridge Pref 11

Sparx Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Enbridge Pref 11

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 11 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enbridge Pref is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sparx Technology and Enbridge Pref

The main advantage of trading using opposite Sparx Technology and Enbridge Pref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparx Technology position performs unexpectedly, Enbridge Pref can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Enbridge Pref will offset losses from the drop in Enbridge Pref's long position.

The idea behind Sparx Technology and Enbridge Pref 11 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.